date | theme

30. January 2019 | Exit taxation: Exit to the UK before Brexit is worth it!

20. May 2019 | Exit taxation: calculation deferral waiver avoidance

29. August 2019 | Relocation of the GmbH shareholder and transfer of registered office of the GmbH abroad

18. February 2020 | New rules on exit taxation: changes as of 01.01.2020

03. June 2020 | Exit taxation & tax easing: Critical analysis of (early) immediate taxation

05. June 2020 | GmbH loss carry forwards: § 8c KStG unconstitutional -> objection & deadline

19. August 2020 | Dubai LLC: tax-free without exit tax for GmbH shareholders

23. September 2020 | Reform of exit taxation: 5 arrangements to avoid

30. October 2020 | Avoid travel tax: set up a family foundation and transfer GmbH shares

9. December 2020 | International triple holding: no exit tax & gift tax/inheritance tax (this contribution)

The international triple holding company is a corporate structure with which you as a GmbH shareholder can avoid both the exit tax and gift tax or inheritance tax in Germany. In order to establish such an international triple holding company, one first establishes a limited partnership as a parent company to the GmbH. Because the departure of a shareholder of a partnership is without effect on the otherwise incurred exit tax. Although it can still come to a tax unbundling, there are solutions that optimize this. As a result, this has no effect on a KG shareholder. In order to exclude gift tax and inheritance tax in Germany, another company is founded abroad, which is superior to the limited partnership. However, some conditions apply here. Thus, international triple holding is only possible in other EU countries. In addition, some blocking periods must be observed.

To understand how an international triple holding company can avoid the removal tax that a GmbH shareholder would have to pay when moving abroad, you have to take a look at the foreign tax law. There we find in § 6 AStG the criteria that lead to a taxation of the departure. It is important for our concern here that the exit tax only comes to shareholders of a corporation.

Unlike the departure of a shareholder of a GmbH, which is here representative of all corporations, the collection of inheritance tax and gift tax has only a limited connection with a departure. Thus, the law stipulates that an inheritance tax or gift tax is incurred in Germany if either the transferring person or the recipient is resident in Germany. Also relevant is the object of taxation, in our case the participation in the company. If the company in question has its registered office in Germany, then, regardless of the residence of the decedent or donor or the beneficiary, taxation in this country is nevertheless unavoidable. We also want to exclude these conditions with international triple holding.

Now let’s look at the holding structure of an international triple holding company, following the path of establishing the individual holding levels.

The starting point of our considerations is of course the GmbH. As a rule, this is a company that has existed for quite some time. If the shareholder of the GmbH would like to enjoy the benefits of living abroad without giving up the GmbH before leaving, then he has, as we have already stated, to expect the removal tax.

In order to avoid the exit tax, the GmbH shareholder establishes a partnership, which is positioned above the GmbH. Very different forms of company can come into question, but in this case the KG is probably the first choice. This can also be further optimized. This is because a GmbH & Co. KG or even a Einheits-GmbH & Co. KG offer the advantage that, as the sole shareholder of the GmbH, no further shareholders need be involved in the founding of the KG.

If you have now founded the limited partnership and transferred the shares in the GmbH to them (for example in the course of a transfer), the shareholder can now move abroad without being subject to the exit tax. However, one must then take precautions that one also avoids tax unbundling within the meaning of § 4 (1) sentence 3 EStG and § 16 paragraph 3a EStG.

Finally, we address the company that the entrepreneur establishes abroad in order to then manage the German limited partnership as a subsidiary. For example, a Dutch B.V., an Irish Limited or a Portuguese SA can be considered.

Let us now consider the impact that we have on Germany’s tax law by designing the international triple holding company.

Since the exit tax within the meaning of § 6 AStG applies only to holdings in a German limited company, the transfer of the GmbH shares to the limited partnership constitutes an exclusion criterion for the collection of the tax.

By establishing the foreign company and transferring the shares of the Deutsche KG to it, we exclude that the shareholder triggers a transaction taxable in Germany when transferring the shares in the foreign company. We assume that the beneficiary – often one or more family members – is also resident abroad. If neither the donor or the deceased nor the beneficiary or the company whose shares are transferred are resident in Germany, then there is no legal basis for Germany to collect a gift tax or inheritance tax. Thus, the international triple holding prevents the occurrence of an inheritance tax or gift tax in Germany.

It is therefore logical that one should also avoid the inheritance tax or gift tax abroad. Fortunately, in many countries, neither a gift tax nor an inheritance tax is part of tax law. So it is best to choose a country that meets this criterion. In this way, you can completely avoid the inheritance tax and gift tax with the international triple holding. This is the case in Austria, for example.

Now we want to highlight the limitations under which the model of an international triple holding presented here works. First of all, it is important that the country chosen as the destination of the departure is a Member State of the EU, but at least of the EEA. Because only under this condition can a tax-neutral de-entanglement be achieved when moving abroad.

Some blocking periods are also relevant. On the one hand, you have to bear in mind that when you move to another EU country, you are subject to a blocking period of seven years before you can move from there to a third country. Otherwise, a retroactive taxation due to the departure is expected.

Furthermore, certain blocking periods should be observed in connection with the inheritance tax and gift tax. In particular, the blocking period of five years plays an essential role, which applies both to the donor or deceased and to the beneficiary or beneficiaries after the departure. Within this time after the departure of these persons, an inheritance tax or gift tax in Germany must also be paid, because here an extended tax liability applies. If, on the other hand, one of these people moves from the EU country to the USA, then the blocking period for inheritance tax and gift tax will be extended from five to ten years.

Since the international triple holding company allows both the avoidance of the exit tax as well as the inheritance tax and gift tax quite legally, it is a tried and tested means to allow shareholders of a German corporation to move abroad tax-free. It is particularly suitable for many entrepreneurs who would rather enjoy their retirement abroad without having to cede control of the company in Germany to others. If one also keeps in mind the blocking periods for inheritance tax and gift tax, then a tax-free transfer of shareholdings is also quite feasible.

However, this option also includes a risk over which one naturally has no significant influence. Because if you die within the blocking period, then a taxation of the heirs in Germany takes place.